Category: Investment

Funding is the bane of most founders’ lives – with what can seem like never-ending rounds of meetings with people who nod and smile and say nice things and then never get in contact again. It can be even worse for founders of hardware start ups who have proportionally far fewer funding sources to approach than the more widespread mobile app/social platform/retail funding availability.

To take some of the pain out of the procedure, we’ve pulled together a list of places – accelerators, angel networks, VCs, grants, loans, and so on – in the UK and Ireland that will specifically offer funding to hardware start ups. They’re arranged alphabetically below with short descriptions attached. If we’re missing any, drop me an email at helen@rapidinnovation.co.uk.

Amadeus Capital Partners

Amadeus has funded over 90 companies and have a broad swathe of interests – most interesting to us is their small portfolio of advanced materials and cleantech companies.

Angel CoFund

A £100 million fund investing solely in UK-based companies. Initial investments are between £100k and £1 million, which is done alongside syndicates of business angels.

Business Growth Fund

Their focus is on late stage investment – they’ll typically put in between £2-10 million in companies with a turnover of £5 million +.

Doughty Hanson Technology Fund

Their head office is in London, but they have several offices throughout Europe. Hardware interests lie in cleantech. Late stage investment.

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Entrepreneurs Fund

Investing primarily in Western Europe, they favour resource efficiency in transportation, energy and water, as well as smart materials. Typical investment is between €1-2 million, although actual range is anywhere from €250K to more than €10 million.

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Enterprise Ireland

A government organisation responsible for the development and growth of Irish enterprises in world markets. They offer grants to companies in any stage of development. Solely available to companies in the Republic of Ireland.

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Frog Capital

Frog Capital invests in companies based in resource efficiencies (alongside its software offerings). It’s looking for companies turning over more than €3 million, and expects to put in up to €20 million.

Google Ventures Europe

Google Ventures will invest in any field but they have a primary focus on machine learning and life sciences. Their European office is based in London.

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Innovate UK

A government body based in the UK who will fund, support, and connect innovative businesses. They’re based in Swindon and have competitions for up to £536 million of government funding available in 2014-2015. They’ll also provide advise on EU funding available, such as Horizon 2020. Only available for UK companies.

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Longwall Ventures

They’re a venture capital management with £40,000,000 behind them. They’ve got a strong interest in science and engineering based start-ups. Located in Harwell, Oxford.

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Maven Capital Partners

Maven Capital has £370 million under its management. Its Scottish Loan Fund provides loans from £250,000 to £5 million to SMEs in Scotland and its Greater Manchester Loan Fund will provide loans of between £100,000 and £500,000 to businesses in the Greater Manchester region. It will also provide funding packages of £2-10 million to UK businesses valued at up to £25 million.

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Octopus Ventures

Octopus Ventures invests between £250,000 and £5 million with a team of 18 people. Their focus is on renewable energy.

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OION (Oxford Investment Opportunity Network)

An angel network operated by Oxford Investment Opportunity who look to invest between £20,000 and £2,000,000. They charge 5% of funds raised.

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Oxygen Accelerator

They invest €21,000 per team in exchange for 8% equity as part of a 13-week programme. Open to all sectors.

SEP invests in the technology, healthcare, and energy sectors. They predominantly invest in growth stage companies, but can make investments in earlier stage companies with outstanding potential. They tend to concentrate on companies based in the UK.

Summit Partners

Summit has raised over $16 billion. Although primarily based in the US, they have a London office. Hardware investments tend to be limited to energy and industrial-based start-ups.

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Sussex Place Ventures

A London-based venture capital firm, they’re interested in science-based companies. They additionally have strong ties to the London Business School.

One of my internship tasks was to speak to a client’s investors and find out who they know that might be interested in that client’s services. The great thing about talking to investors is that they are keen to help out, as they have a financial interest in the development of the company. The difficulty is that they don’t have a lot of time. This is my advice for making the most of both their willingness as well as their precious time:

1. See them face to face

Although often difficult to attain, if you can arrange a meeting in person this clears a space in their diary that (usually) won’t be shuffled around. I’ve sat down to speak on the phone at least three times with one investor, and every time it’s had to be moved at the last minute. Seeing them in person guarantees you’ll see them, and you’ll get so much more out of it than any other kind of contact.

2. Set your scene

Surroundings set the scene for a meeting, literally. For this kind of meeting, it was important for it to be light-hearted, so meeting in a casual place helped. I met with one investor in a cool, quirky restaurant in Shoreditch with excellent chips. Another I met at a café in Mayfair at 11 in the morning, and while I waited I had the pleasure of watching a man wearing a dapper suit sitting alone smoking a cigar alongside his espresso.

3. Prepare well

It makes such a difference to have done lots of research beforehand and arrive with plenty of ideas to guide them towards your goals. They want to help, and any lifelines you can throw them are welcomed. I raided their LinkedIn profiles in advance and came up with a long list of potential contacts that they could instantly eliminate or accept. This also got their cogs whirring for other similar contacts to the ones I had chosen. Similarly useful was a list of current clients, which helped investors to get a better idea of who I was looking for and further jogged their memory.

4. Interested and interesting

I also took the opportunity to find out what they’re all about. Many of them are involved in pretty exciting projects, and finding out more about them not only gives you something fun and easy-going to chat about, but also gives you a better picture of how their network could fit with the company. Likewise, they took a friendly interest in me and my work, which takes the edge off the professional agenda.

5. Get to the point

Be clear about what it is that you’re looking for. No need to bark orders at them, but they appreciate explicit instructions. In fact, many of them started the conversation with direct orders for me to give them direct orders.

They haven’t got oodles of time, but they want to help. Be straightforward and friendly. If all goes well, then both sides will leave happy.

In his March 2014 budget the Chancellor announced that the Seed Enterprise Investment Scheme would become permanent.

This is the scheme that allows companies that have been trading for less than two years and that have less than £200,000 of assets to raise up to £150,000 of capital from UK investors with a tax treatment that makes it very attractive for the investors to invest.

For their part, investors can invest up to £100,000 per tax year spread across one or more companies.

How does it work?

UK tax-paying investors get a 50p tax credit on the monies that they invest as equity in SEIS-qualifying companies, regardless of the marginal income tax rate that they pay. Investors also receive capital gains tax relief of 50% on any capital gains they use to invest in SEIS-qualifying companies: for every £1 of capital gains invested, higher rate tax-paying investors get a 14p tax credit.

In the event that an investee business fails, the investor gets a further 22.5p in the pound tax write-off.

In summary what your recovery per pound invested is:

Tax Credit given

Company succeeds*

Company fails

Investor not investing capital gains

50%

72.5%

Investor investing capital gains

64%

86.5%

*providing the shares are held for 3 years or longer.

Plus, any capital gains made on the SEIS investments themselves are exempt from Capital Gains Tax.

Looking forward

While SEIS tax reliefs have only been available for investment in ordinary equity to date, the government is exploring whether similar reliefs can be extended to other investment instruments such as convertible loans.

SEIS is here to stay. Having an environment where entrepreneurs can de-risk equity investment for their early investors to such an extent is a big positive for innovation. While it means the Taxpayer will have to pick up the bill for the investments that will fail – and there will be many due to the nature of early stage investment – for those raising or investing money, the benefits are compelling.